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05/08/2021 02:51 AM
Pennsylvania State Senate
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=S&SPick=20210&cosponId=33287
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Senate of Pennsylvania
Session of 2021 - 2022 Regular Session

MEMORANDUM

Posted: December 8, 2020 02:30 PM
From: Senator Scott E. Hutchinson
To: All Senate members
Subject: Data Center Sales and Use Tax Exemption
 
In the near future, I intend to introduce legislation similar to what I have introduced the last three sessions to establish a sales and use tax exemption for certain equipment purchased by large-scale and colocation data centers as a way to attract them to locate and invest in the Commonwealth of Pennsylvania. Currently, there are 29 other states that exempt data center equipment from sales and use taxes.
 
Existing tax policy has limited the growth for existing colocation data centers whose efforts to attract tenants are challenged with neighboring states offering such exemptions. At the same time, Pennsylvania has not been able to attract a single large-scale data center, which are instead choosing to invest billions of dollars in Ohio and Virginia.
 
In fact, over the last several years, no large-scale data center has located in states that impose sales tax burdens on data center server equipment. Similar to sales tax exemptions for other industries in the state such as farming, manufacturing, and mining, this attracts companies to locate their data centers in Pennsylvania, creating capital investment and high-paying jobs as a result.
 
Data centers made $60 billion in capital investments in the US in 2019 alone, leading all other industries. In Pennsylvania, according to a 2019 report by EConsult Solutions, the data center industry could create over $110 million in net tax revenue in 2024 and up to 33,000 more in total jobs.
 
My legislation proposes to replace the existing sales tax refund program which is currently capped at $7 million annually. The new program would allow sales tax exemptions – but only for companies meeting significant investment and payroll thresholds. The existing refund program is limiting the growth potential for the industry in Pennsylvania, as it is allocated pro rata amongst all applicants. This means that companies considering locating their data centers in the state do not know the amount of savings they would be able to invest in additional capital or jobs until more than a year after they make their investments. Converting the refund program to a qualified exemption will allow the Commonwealth to compete nationally and allow large-scale data centers and potential tenants of colocation data centers to more effectively plan for investment.
 
In order to qualify for the tax exemption, data centers must meet both capital and payroll investment thresholds. This ensures that the state is exempting only for large investments in the industry as a means to generate other revenue for the state and create an environment that creates high-paying, high-tech jobs in computer data centers and related industries.
 
I urge you to invest in the future of Pennsylvania by joining me in cosponsoring this legislation. Let’s not continue to allow the Commonwealth to be left behind.
 
If you have any questions, please contact Nathan Akers in my office at 717-787-9684 or nakers@pasen.gov
 



Introduced as SB463